The Irish Financial regulator at the Central Bank has urged the government not to consider imposing losses on Anglo Irish Bank senior bondholders, although it is possible he warned against such a move.

Speaking at the Oireachtas Joint Committee on Economic Regulatory Affairs, Matthew Elderfield said "The current difficult funding position for both the Irish government and the banking system means one should be very cautious about contemplating such a step in the present crisis, never mind whatever legal and constitutional obstacles would need to be resolved."

Mr Elderfield also provided assurances that his office would in the future deliver "a more assertive, risk-based and challenging approach to banking supervision."

"We will make life difficult and expensive for banks which fail to manage risk adequately," Mr Elderfield said.

The head of financial regulation admitted recovery of the Irish banking system was going to be a slow process.

"While the Irish banking system deteriorated rapidly, it will only be rebuilt slowly. At the Central Bank, we are under no illusion about the work that still remains to be done. We are by no means near the end of this process, but we are coming to the end of the critical recapitalisation phase, he added".